The Collins Company paid $1,050,000 to acquire 70% of Revsine Company's outstanding common stock on July 1, 2018. Revsine's balance sheet on the acquisition date reported net assets totaling $1,200,000. Revsine's land had a fair value which was $175,000 greater than book value, while the inventory's fair value exceeded its book value by $67,500. Immediately after the acquisition of the Revsine stock, Collins reported net assets of $5,785,000.Required:
Determine the consolidated net assets total as of July 1, 2018. Determine the amount of noncontrolling interest to be reported on the July 1, 2018 balance sheet. How is the noncontrolling interest reported within the consolidated balance sheet? Assume that the acquisition method of accounting is applicable. 

What will be an ideal response?

1.

     
Collins Company's net assets$5,785,000  
Revsine Company's net assets, book value 1,200,000  
Investment in Revsine account (1,050,000) 
Land fair value adjustment 175,000  
Inventory fair value adjustment 67,500  
Goodwill 57,500* 
Consolidated net assets as of July 1, 2018$6,235,000  
*The implied value of Revsine is $1,500,000 ($1,050,000 ÷ 0.70). The implied value exceeds the $1,200,000 book value by $300,000. The $300,000 differential is partially explained by the land differential of $175,000 and the inventory differential of $75,000; therefore, Goodwill must be $57,500 ($300,000 ? $175,000 ? $67,500).

2. The noncontrolling interest of $450,000 [($1,050,000/0.70) × 0.30] is reported as a component of stockholders' equity on the consolidated balance sheet.

Business

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